Active exchange traded managed funds – What are they? | BetaShares

Active exchange traded managed funds – What are they?

BY Matthew Leung | 28 June 2016
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As you might have heard, BetaShares recently announced a strategic alliance with AMP Capital to launch a series of active exchange traded managed funds on the ASX. The first two of these funds are actually now trading:  AMP Capital Global Infrastructure Securities Fund (Unhedged) (Managed Fund) (ASX: GLIN) and AMP Capital Global Property Securities Fund (Unhedged) (Managed Fund) (ASX:RENT).

 

In adding an “Active” category to our product suite, I think it is a good time to briefly go over what these products do and how they differ from our existing product suite.

Active exchange traded managed funds are very similar to ETFs, although they have some important differences.  So what is this relatively new type of fund?

  • The structure: At the heart of the product is still an open-ended managed fund that can be bought and sold like any share on the stock exchange. Liquidity will still be provided daily by a market maker, and the funds will also have a live iNAV (indicative net asset value).
  • Exposure: The exposure you will receive is essentially the same as existing, equivalent unlisted fund versions managed by AMP Capital, but in an ASX-traded format. That means you will get the benefits of intra-day liquidity on the ASX and access to the iNAV, in addition to the investment management expertise of AMP Capital in particular asset classes. AMP Capital will make active decisions on what the fund invests in, seeking to outperform the specified benchmark (unlike an ETF, which passively seeks to track the performance of an index or asset class). As such, as part of your assessment of the product, you will also have to satisfy yourself that AMP Capital is an appropriate active manager for your investment.
  • Market making: ETFs are open-ended vehicles where the number of units on issue can be increased or decreased in response to changes in investor demand for units. Professional market makers are engaged to sell units to investors when there are buyers, and buy units when there are sellers. If they need to, market makers can readily increase or decrease their supply of units (by dealing directly with the ETF) to sell or buy on-market to meet changing levels of market demand. In the case of active exchange traded managed funds, the fund issuer, eg BetaShares, acting on behalf of the fund, will perform the role of market maker to provide liquidity during the trading day, offering to buy units from or sell units to investors. The iNAV for each AMP Capital active exchange traded managed fund is available on both the BetaShares and AMP Capital websites.

The custodian, fund administrator and unit registrar of an active exchange traded managed fund perform the same roles as they do for an ETF (see this post for more information).

How they can benefit investors?

Active exchange traded managed funds:

  • Can be bought or sold via an exchange (such as the ASX) in exactly same way as buying a share or ETF.
  • Deliver easy access to active investment management capabilities, with the potential to outperform an index or benchmark.
  • Provide transparent intra-day pricing via the exchange – unlike traditional managed fund prices which are only set once per day or less frequently.
  • Can be managed and reported-on alongside all other broker holdings, making portfolio administration and tax reporting easy.
  • Offer differentiation – they generally invest into a diversified portfolio otherwise difficult for retail investors to access.
  • Don’t require any paperwork once a broker account has been established – no forms are necessary.
  • Require no minimum investment.

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